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Liberty County legislator Bailes has bills headed to governor’s desk

David TaylorMay 27, 2019

In the waning hours of the 86th Regular Session of the Texas Legislature, a half dozen or so bills filed by State Rep. Ernest Bailes are headed to the governor’s desk.

Among the significant bills include one that could head scammers off at the pass.

The bill addresses an issue facing those landowners who have been the target of a scam, which sells their mineral rights without knowledge of doing so. Bailes’ staff figured there was at least 2,500 royalty mineral rights owners in House District that would be affected by the legislation.

“They target mostly those who are uneducated about the process and the elderly,” Bailes said from his office in Austin.

HB 3838 amends the Texas Property Code which contains requirements for mandatory disclosures in offers to purchase mineral interests. Mineral and royalty owners in Texas, a high percentage of those being primarily elderly and vulnerable individuals, have been the target of a scam in which they’ve been deceived into selling their mineral interests rather than leasing them.

“Bad actors do this under the guise that the document being signed will bring a royalty owner more income from the lease, but instead the document completely separates the royalty owner from their mineral interests,” he said.

The representative said there are two main firms, one in Beaumont and the other in San Antonio, who have been sending the unsolicited offers for a surface lease or royalty lease.

“They actually send (the landowners) a check saying it’s an opportunity for them to negotiate on their behalf to get them more money for their surface rights and the use of but in the contract, they’re really conveying over typically about 75% of the mineral interest and that’s not even known until it’s too late,” he said.

The real issue for landowner’s is no recourse.

“There’s been no mechanism in place to correct this,” he said.

Bailes had the cooperation of industry to work on a bill that would get rid of the bad actors, but it wasn’t easy. Most were not anxious for him to open the mineral statutes and make changes.

The state representative was able to assemble a group of stakeholders including Texas Land and Minerals Association, Texas Oil and Gas Association, Chevron, ConocoPhillips, National Association of Royalty Owners, and the Texas Independent Royalty Owners and ask what they could do to protect the property owners and without being a negative impediment to industry and business.

“It gets really sticky when you start changing statutes and codes about mineral leases because you could have a negative unintended consequence which would overly complicate the oil and gas industry in Texas without any intentions of doing so,” Bailes said.

He explained that the two companies had ramped up their business in the last two years with this loophole and really exploited individuals.

“This is the first opportunity we’ve had to close that and put these protections in place,” he said.

Fortunately, the scam hadn’t entered the House District 18 area as much as in other Texas counties. Bailes, who sits on the Energy Committee, heard about the issue in conversation.

“Once it came up, my staff and I went to work on it.”

Most bills originate from addressing home districts, but Bailes wanted to head this one off before it became a problem back home and around the state.

For landowners, it could cost them thousands and even millions in the long run.

“The more successful they became, the more emboldened they were and that’s why we needed to shut this down now before it becomes more out of hand,” he said.

Once Bailes was able to present agreed upon language to the committee and to the House, the contentious issue went away and paved the way for passage in the House 138-5 and unanimous consent in the Senate, 31-0.

The bill expands the provision in the Texas Property Code for mandatory disclosures to apply to leases, not just purchases of royalties and mineral interests; makes requirements of the disclosure to be explicit; and finally expands the remedies to be able to rescind the sale and recovery of damages, including royalties and bonuses paid to the purchaser or any successor, court costs, and attorney’s fees.

“This has been a hard-fought bill and a win for private property rights,” Bailes said.

While Tuesday is the last day of the session, the governor still has 30 days following sine die.


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